Australian credit card debt has fallen over the past year according to the Australian Bankers’ Association, but is this a reflection of us becoming more financially responsible or the rise of Afterpay?

Analysis from the Australian Bankers’ Association (ABA) has found a decrease in the overall credit card debt in Australia for the third time in history.

Aussies have repaid not just interest but reduced the overall outstanding balance by $260 million to $52.2 billion.

“Last year Australians spent nearly $325 billion on credit cards, but repaid $341 billion, $16 billion more than they spent.

“For only the third time ever Australia has reduced its overall amount outstanding on cards – this time by $260 million.

“Further evidence of prudent use of credit cards is the total amount accruing interest on credit cards remains well below the peak in early 2012, with the proportion of the balance on which interest is paid (61%) close to a record low.

“This means people are now paying interest on a smaller portion of their balance, which helps to keep credit card costs manageable,” said Mr Pearson.

The RBA data also shows that card holders are only using 34 per cent of their available limit, which is the lowest proportion in fifteen years.

Is this the death of credit cards?

It appears as if Australians have finally wised up to credit card debt, with these ABA figures reflecting the third ever drop in debt in history.

Recently it appears there’s been a shift in attitude towards paying interest on your purchases, as reflected in the rise of staggered payment fintech like Afterpay or Ezi-Pay.

Afterpay allows you to buy an item in store or online and pay it back in four instalments over eight weeks. These instalments are automatically deducted from your nominated transaction account or credit card.

Over 1.1 million Aussies have signed up to this service that reaches 8,600 participating merchants. It’s only set to grow, not just in Australia, but in the US and beyond.

This is due to the fact unlike paying with a credit card, Afterpay will not charge you interest on your outstanding balance. In fact, if you were to always pay on time, there would be no additional costs.

The decline in credit card debt numbers could be attributed to “increasingly savvy customers”, as hypothesised by Mr Pearson, or part of a larger cultural shift away from credit cards all together.

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